Ericsson’s is said to prepare a very extensive cost program where the 25,000 employees could be affected.
– It’s not only that people may stop but could involve Ericsson to sell parts of the business or are forced to close down parts of the business to get up profitability and efficiency, says Patricia Hedelius.
could go SvD Business uncover Ericsson management feel pressured to find additional savings. The information received widespread attention in the stock market and led to great anger from unions within Ericsson. Already this summer is expected to 3000-4000 employees laid off in an effort to achieve the goal of cost-cutting program launched in 2014, according to data SvD Business.
But it is not enough when Ericsson’s sales are shrinking.
Now circulates according to sources SvD Business information at a high level in Ericsson that Group management is working to develop a new comprehensive cost programs that may involve some 25 000 employees in Ericsson can get going when the product is closed or the entire operations are set up on the sales list.
Ericsson CEO Hans Vestberg has so far been difficult to take a holistic approach with the current program. Since the company’s current strategy means that Ericsson shall have a broad product range, it is difficult to dismantle the entire operations.
Hans Vestberg has therefore been referred to the cheese slicer principle of savings, which is also the method in 3000-4000 employees is expected to be given notice in the first instance.
But Ericsson cost problem is much bigger than that.
in a recent analysis of Nordea noted that Ericsson in 2001-2004, in the wake of the telecom crisis, reduced its cost base to 40 billion per year. But since then, the annual costs swelled to 60 billion, although sales have not increased significantly. Nordea estimated in an analysis that savings need amounts to around SEK 20 billion.
In order to achieve this need and Hans Vestberg, Ericsson management to establish a new strategy. It would mean that a significantly larger number of employees would have to leave Ericsson.
According to data from within Ericsson, a large number of employees have to apply for their jobs, which could be a first step to identify those which can leave the company
Mattias Eriksson, independent analysts, believe that a first notice of the order of 3000-4000 is expected.
– the management must feel the pressure from shareholders to act in that there is much talk of investing revolves around the efficiency of product development. Both the research and development side of the company must be improved, says Mattias Eriksson.
No decisions will according to SvD Enterprise tasks to be taken over, but the pressure on Ericsson’s great. As SvD Business’ve written before, the company has expanded over Hans Vestberg time as CEO. The number of employees has increased from 82,500 in 2010 when he took over from Carl-Henric Svanberg to 116 300 at the end of 2015. This is an increase by 34 000 people. And despite the fact that over 400 billion has been invested in research and acquisitions over the past ten years, Ericsson’s market capitalization of 200 billion. Profitability has fallen dramatically during the period.
According to SvD Enterprise sources CEO Hans Vestberg previously been skeptical of large cost programs that affect employees. He and Ericsson’s management has instead stressed the importance of the company to invest and grow. Even Chairman Leif Johansson, according to people with good insight into Ericsson has been hesitant to severe staff cuts especially if it affects Swedish engineers.
But with the trust of the owners who almost is in free fall as forced management and the board take action. When SvD Business last Friday met Hans Vestberg he replied as follows on the question of the need for more savings:
– Cost savings, we work with all the time. Then we have a great program that addresses the fixed cost basis, then we have to make dimensioning on the basis of the market that we talked about in the first quarter. We sized down, for example, our installation service when the market went down.
So you have no major new cost program in your back pocket?
– I think that the 9 billion is quite large, there is a fixed amount and the net amount that we charge in 2017. there we have good progress, but much remains to be done.
Ericsson comes with its second quarter report on 19 July. There have been a couple of weeks of speculation in the market that the company will find it difficult to reach analysts’ profit expectations.
Even internally available a concern to show the cards. Looking for additional revenue in the longer contracts that you can show up even now. But it looks difficult, says a person at Ericsson.
To deliver a major new austerity package may shift focus from another disappointing result. Previously, Hans Vestberg was not averse to going out with cost savings between the two quarterly reports.